AT&T MCCAW Instructions 1
AT&T MCCAW Instructions 1
You are a member of a merger negotiation team representing one side of negotiations between MCCaw
Cellular and AT&T. Your teams goal in this negotiation should be to represent your firm effectively and to
maximize value for your firm’s shareholders. Careful analysis and artful negotiation will accomplish these
goals. A schedule for the activities in this exercise is attached.
Objectives
(2) consider the interplay between strategic and financial considerations in arriving at
satisfactory merger terms, and
(3) explore creative structuring solutions for possible use when the expectations of
buyer and seller have little common ground.
Each side of the negotiation is to receive a separate case study containing private information for your
team only. If you wish, you may divulge this information to your counterparty in the negotiations on
Friday, but not before.
On your own, you should study the case assigned to your side of the negotiations.
I will hold briefing sessions for the two sides independently next week (November 10 or 11th)
At the start of the negotiations exercise 7.15 pm on Saturday November 19th, 2016 the McCaw teams will
need to give me a report stating their opening asking prices for the assets of their own firms (in millions
of U.S. dollars, not per-share figures) and the prices below which they will abandon negotiations.
At the same time (7.15 pm Nov 19th), the AT&T teams will need to give me a report stating their opening
and walk-away price offers for McCaw. The report of both teams should be in hard copy. You are also
required to email a report to me [email protected].
All teams are requested to present an analysis justifying their walk-away prices. A standard form for these
pre-negotiation reports is attached—please note that this report requires you to submit a completed DCF
analysis. This information will be held confidential until the debriefing.
Remember, this is a simulation. There are no right or wrong answers in the exercise; there is no script
that you are to follow. The results are entirely of your own making.
For details of the exercise please go through the power point file mailed to you.
Negotiations:
At the end of the negotiations each pair of teams will submit the agreement they have arrived at.
Confidential Pre-negotiation Team Report
Due at 7.15 pm on Saturday Nov 19
Your team: (check one) McCaw________; AT&T_____________
Team-members’ names:________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
1. Report your opening and walk-away prices. Please quote all prices (in millions of U.S. dollars) as cash
payments for the entire assets of McCaw. This convention is simply to put all initial prices reported here
on a similar basis. You need not restrict your negotiations, bids, or transactions to this type of
transaction. To clarify, if you feel McCaw is worth $200 billion, and it has $50 billion of debt outstanding,
you are to quote a price of $200 billion even if you would only pay $150 million($200 million—$50
million) for the equity of McCaw, if you assumed the debt.
This is the price you will initially offer/ask for McCaw’s assets.
Please staple to this form a copy of your DCF analysis justifying your walk-away price. This analysis
should show clearly: (1) annual free cash flows in the walk-away case, (2) terminal value, and (3)
discount rate, including how you estimated it.